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International Business Strategy

International Business Strategy. Developing Core Business Strategies. 1. Internationalization Of Core Strategies. Country A. Country B. Country N. Globalization. International Marketing Dimensions. Controllable vs. Uncontrollable Standardization vs. Differentiation (Customization)

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International Business Strategy

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  1. International Business Strategy Developing CoreBusiness Strategies 1. • InternationalizationOf Core Strategies Country A Country B Country N • Globalization

  2. International Marketing Dimensions • Controllable vs. Uncontrollable • Standardization vs. Differentiation (Customization) • Mode of Involvement (Function of firm’s size, skills, demand, control and risk issues) • HQ vs. Subsidiary • The Emergence of Trading Blocks

  3. The Global Industry Market Drivers Demand IndustryGlobalizationPotential Cost Drivers Government/Public PolicyDrivers CompetitiveDrivers

  4. The Spectrum of International Marketing Involvement • Franchising • Licensing (Licensee Name) Licensing (Licensor Name) Joint Venture Strategic Alliance Inactive Exporting TurnkeyContract Proactive Exporting Management Contract Direct Investment Less Involvement More Involvement Contractual Relations/Arrangements

  5. OLI – Dunning Framework and Entry Mode Choice • All firms select their entry mode strategies by CONSIDERING 3 VARIABLES: • Ownership advantages which are less concerned with control/risk issues as related to inter-firm relationships • Location advantages which are concerned with the resources commitment issue, as related to the availability and cost of resources • Internalization advantages which are primarily concerned with reducing transaction and coordination costs.

  6. OLI – Dunning Framework and Entry Mode Choice • Data suggest that the ability to differentiate products is more important to firms in determining entry mode choice than the strength of contractual risk. • Also – investment risk is more important than market potential when assessing an entry mode.

  7. OLI – Dunning Framework and Entry Mode Choice • Recent trend - • Non equity modes • Modes that are becoming increasingly popular among service firms for organizing overseas ventures/operations. These entry modes are essentially contractual and include leasing, licensing, franchising, and management service contracts. • Note: Entry to a large extent is driven by the strategic objectives spelled out in the company’s global mission

  8. Licensing • A contractual transaction whereby the firm – the licensor – offers some proprietary assets to the foreign company – the licensee – in exchange for royalty fees • Assets: trademarks, technology know-how, production processes, and patents. • Royalties: typically between 1-15%

  9. Franchising • The franchisor gives the franchisee the right to use the franchisor’s trade names, trademarks, business models, and/or know-how in a given territory for a given time period, normally 10 years. • A “package” to the franchisee might include the marketing plan, operating manuals, training and quality monitoring.

  10. Entry Decisions: Strategic Parameters

  11. Market Stage

  12. Decision Criteria for Country Selection • Market Size and Growth • Risk (Political & Economic; Internal & External) • Government Regulations • Competitive Environment • Local Infrastructure • Country Classification • Platform – gathering intelligence and establish a network (Singapore, Hong Kong) • Emerging Market – Vietnam, Kazakhstan • Growth Markets – The Czech Republic, China, Brazil • Maturing Markets – Japan, Germany

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